Friday, January 22, 2021

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Positioning: Target Marketing for Technology Products

Because of the proliferation of new technologies and new products, users are bombarded with choices and have a difficult time differentiating and selecting the best of many alternatives. Meanwhile, many small companies fighting for recognition in this sea of possibilities can't understand why their innovative products aren't selling well.

The solution to both group's problems is positioning: creating a desired image for a company and its products within a chosen user segment. The positioning process further helps high-tech manufacturers deal with such problems as limited product life cycles, limited lead times before competitors respond with equal or greater improvements, as well as the desire to control new technologies introduced during a short time period or to a particular target market[¹].

Traditional Methods Fall Short

Traditional market segmentation is the division of a large market with diverse needs and wants into specific segments or submarkets. Each segment consists of potential buyers with similar needs and wants. It is from these segments that you must select the target markets to which you will sell your products.

According to classical marketing theory, the segmentation process creates specific groups that:

• Each have relatively distinctive behaviors
• Can be described by measurable and understandable dimensions
• Have appropriately sized market potential
• Have an accessible means of communicating with them

Consider the example of consumer-goods market segmentation. That process identifies target markets by either classifying the universe into demographic categories, or by conducting psychological or sociological research. If either method uncovers an adequately sized potential market, a company can further discern that particular group's purchasing habits, needs, and wants, and tailor its product accordingly.

This approach, though, is inappropriate for many high-technology manufacturers[¹]. These segmentation procedures are designed for markets where manufacturers can easily identify and gather extensive quantitative data on the appropriate industry or on the broad customer group interested in its product or service. Additionally, the uses for consumer products, such as household appliances, are generally inherent in their design or have already gained market acceptance.

Particularly Difficult Environment

High technology companies face a particularly difficult marketing environment for several reasons. First, competition and technology move too fast to allow marketers to gather extensive quantitative data. They often don't know, or can't identify, many of a product's applications. They must often prioritize the market they choose to address because many products have market potential across several industry categories. In the process, they must deal with different buying cycles.

Second, many high-tech buyers are reluctant to take the personal risk of bringing new technology into their company due to the rapid pace of technological advances and the incapacitating FUD factor (Fear, Uncertainty, and Doubt). This problem is only exacerbated by the plethora of engineering-driven companies that appeal to customers' needs and wants based solely on product specs.

In reality, many high-tech companies don't even go as far as using traditional techniques. Often they see a small, unfilled niche within a market, create a product to fill it, and hope a sizable market will appear to support their efforts.

A good example comes from the data acquisition market where more than 150 vendors currently sell PC-compatible devices alone. How can buyers differentiate all these products? Complicating the situation is the fact that such devices are suited for a wide variety of R&D and manufacturing applications, ranging from medical research to chemical batch processing to electronic assembly. Put simply, the battle for recognition and share of mind can't be won on engineering talents alone.

Positioning

This battle leads to the concept of market positioning. The concept is simple - to be successful, a company must differentiate itself and its products from all others, thus obtaining a unique position in the marketplace[²]. After all, if manufacturers can't differentiate their products from their competitors', how can they expect the same of customers - who are much less familiar with the products and the market?

When positioning is left to buyers, they carry out the process in a haphazard manner. For instance, to effectively evaluate products that are sold on specifications alone, end users must perform a painfully detailed competitive analysis that, in many cases, reveals no significant differences. This dilemma is magnified when manufacturers make no efforts to sell to specific markets or inform buyers of their strengths. Indeed, when buyers make a purchase, they're interested in buying much more than product specs. They also buy into the company selling the product, including its service, quality, and future technological innovations.

Implementation

The actual implementation of market positioning isn't as straightforward as segmentation. To achieve the desired positioning, manufacturers must honestly evaluate many factors:

• What business are you in?
  
  
• What are your company's strengths and weaknesses?
  
  
• Describe your market. Is it mature? What is its growth rate?
  
  
• What do you think the public considers to be your strengths and weaknesses?
  
  
• Who are your competitors? What are their strengths and weaknesses?
  
  
• What directions will your company take in the near future? Longer term? Consider aspects such as technology, pricing, distribution channels, and new application areas.
  
  
• What are the key factors for success in each of the above market segments?
  
  
• How long will it take to implement your strategy in each segment?
  
  
• What are the trends in each market segment?
  
  
• What percentage of company resources will be devoted to each segment?

Many companies are often surprised that there's little consensus internally regarding the answers to these questions. Especially in regard to two of the most important factors:

• What is our company's business?
  
  
• What do we do better than anyone else?

A company can differentiate its products from its competitors' based on such factors as technology, target audience, target application, price, quality, or distribution channels. For instance, do we offer the broadest line of products that meet the requirements of many industries? Can we take advantage of economies of scale and offer the lowest price? Do we have the lowest defect rates and most accurate specs of all our competitors and thus offer the highest quality?

Product positioning alone won't make a product successful, though. Marketeers must also be sensitive to how the market receives and subsequently positions their company as well as the product. If the company isn't totally honest during its internal evaluation, the marketplace will let it know. Based on market feedback, a company must be flexible enough to react to those opinions it wants to enhance or modify.

For instance, it's not hard to find vertical-market electronics companies that are convinced they offer the best service. One such company insists they offer the best of everything - from sales assistance to applications engineering to high-quality manufacturing. In fact, the market perceives its products as poorly engineered, the sales department is understaffed and undertrained, and the applications engineering group has little interest in giving a customer more than two minutes on the phone. Although this company keeps trying to convince buyers that they have the best service, the market tells them through decreasing sales and loss of market share that they don't.

The Long Road Back

Such companies face a long haul in changing this perception. None of the steps in market positioning happen overnight, and it's a long, painful process to position both a company and its products. Having to reposition a company and change customers' views is even harder. Therefore, it's best if a company carefully considers these issues up front - long before it introduces any products.

Whether it concerns product positioning, public relations, advertising, or distribution channel management, marketing must be treated as a long-term, strategic process. To be successful, marketing must be a learning process for the entire company, from the CEO to the receptionist. With the proper guidance, your marketing efforts will represent an accumulation of knowledge and experience about your products and, most importantly, your customers.

References

1. McKenna, R. "The Regis Touch". Addison-Wesley Publishing Co. Inc., 1996.
2. Shanklin, W. and Ryans, J. "Marketing High Technology", DC Heath and Co., 1984.